June 05, 2012

What is an E-Commerce Contact and How do I Draft One For My Web Site?

An e-commerce contract is a broad category of contracts for companies doing business on the internet. Typically, what lawyers think of as e-commerce contracts, are contracts that are going to be related to the buying and selling of goods and services on the internet. So the e-commerce portion of that label denotes that there's a transaction taking place between folks. An e-commerce contract could be many different things. It could be a contract that a website owner, small business, internet start-up has with a provider of e-commerce services. There are a number of outsource solutions you can register for, and negotiate, in order to have e-commerce services provide to you. Or, it could be the contract between you and your consumer that you're taking money from. There's a wide variety of things that deal with the e-commerce world on the internet. Many of the relationships are governed by contracts.

Welcome to Internet Law Radio where we discuss the hottest topics in Internet law. If you are facing an Internet law issue, cyber law complaint, web site or e-commerce issue, we have an Internet lawyer ready to help.

Matt: Hi, it's Matt Plessner from Internet Law Radio. Today, we're going to be talking about e-commerce contract drafting tips, from an internet law attorney. Today that internet attorney is Enrico Schaefer from the Traverse Legal Office. Enrico, how are you?

Enrico: Great, Matt. How are you doing, today?

Matt: I'm doing very well. Thank you, very much. You're an internet law lawyer at a law firm that specializes in online legal issues. Exactly, what is special about an e-commerce contract that requires the expertise of an internet law attorney?

Enrico: An e-commerce contract is a broad category of contracts for companies doing business on the internet. Typically, what lawyers think of as e-commerce contracts, are contracts that are going to be related to the buying and selling of goods and services on the internet. So the e-commerce portion of that label denotes that there's a transaction taking place between folks. An e-commerce contract could be many different things. It could be a contract that a website owner, small business, internet start-up has with a provider of e-commerce services. There are a number of outsource solutions you can register for, and negotiate, in order to have e-commerce services provide to you. Or, it could be the contract between you and your consumer that you're taking money from. There's a wide variety of things that deal with the e-commerce world on the internet. Many of the relationships are governed by contracts.

Matt: What kind of e-commerce contracts, Enrico, are there for web and start-up companies to consider?

Enrico: Well, the first thing is whether or not you're going to take money over the internet through a third party vendor, such as eBay. Or, there are a number of intermediary solutions similar to eBay that you can plug into. They'll give you the HTML code for your e-commerce platform, and take money. There's a number of e-commerce certification companies out there that will certify your website in terms of privacy policies to make sure privacy expectations are being managed and captured by contracts. Then, there's the agreement which are typically the Terms of Service or Terms of Use agreement between you and the consumer who's buying goods and services off your website. There are a number of other e-commerce contracts that deal with the terms of taking money. You can sometimes, as an internet company, contract with affiliate marketers who will try to sell your goods and services for you. These affiliate contracts are a form of e-commerce contract. There are a number of things that apply here. From the website owner's point of view, you're going to have your Terms of Service agreement and your privacy agreement to help you control your experience with the consumer. For instance, when a consumer is going to put personal information into your website to make a payment or buy a good or service, you have to have a privacy policy on your website which will govern what information you're gaining from the consumer, and what you will or will not be doing with that personal information. That personal information will be anything from name, address, or credit card number.

Matt: Enrico, what e-commerce contract tips would you give to web companies looking for reduction of risk?

Enrico: That's it, Matt. You hit the nail on the head. This is all about risk management. From the web company point of view, if you're going to have contracts with third party vendors, you need to spell out what that relationship is going to be and who's going to take what risk. If a transaction doesn't go through, who's taking that risk? If credit card information is stolen, who's responsible for that? There are any number of things that you, as an internet start-up company, could base in terms of liability that could put you out of business if you don't control it. The first tip I have is to think about it from an e-risk point of view. What are the things that will potentially kill your company, put you out of business. You have to make sure you're protecting those. The second thing is that all of these e-commerce contracts should be drafted by your internet law attorney from the point of view of your business model.

Some internet start-ups and web companies want to be able to use the personal information of consumers for lots of different purposes, including e-mail list distribution, potentially selling to third parties, or potentially matching ads to consumers. You have to spell all that out in your privacy agreement. The first thing your attorney is going to have to do is understand your business model. Where it is today as a small business, and where it will be twelve months out, or five years out, as a mid-growth company. Once you understand the business model, the lawyer can go about drafting away some of the risks you're going to take. It all starts with the business model and goes through the process of risk assessment to deal with things like, if you get sued, are you going to control where the consumer will sue you. If they sue you their own back yard, and that's hundreds of thousands of miles away, that's going to cost you more to deal with that suit. Are you going to allow lawsuits? Are you going to force arbitration? All these things need to get analyzed by your internet law attorney, and incorporated into the contract. As you experience problems, and this is my most important tip, with your business model, you want to share those with your lawyer, and let them understand what the problem was and how it got resolved. Then review your e-commerce contracts to see if that was handled appropriately. You're always starting with a Version 1 e-commerce contract, and you're going through iterations of new contracts, based on your experience as a company, and with the types of issues that arise. That leads to my last tip. You need to remain flexible within your e-commerce contract, to allow you to make changes over time.

Matt: Enrico, what kind of risks do e-commerce companies face when they sell things online?

Enrico: There's a lot of potential risk out there. Because you're taking money, and sometimes paying money. You're selling goods and services, and you're providing those things. The biggest risk that website owners face, is the threat of getting sued. A piece of litigation filed against your company can cost you a lot of money in attorney fees. The first thing you're trying to do is avoid litigation. Avoiding litigation isn't about tricking people. It's about setting expectations and managing risk. So the first thing you want to think about is, if somebody had a real problem, if your company really screws up, how will it play out in terms of where the forum is, what type of adjudication is going to occur, and what kind of damages will or won't be available in that litigation. One of the things you could do is say your total risk exposure is the price of the goods or service purchased in that transaction, and that no lost profits can be obtained as part of that transaction. Your e-commerce contract can control that litigation or venue risk, and will also control the expectations of the party. These are the types of things you need to think about. In the privacy policy area, that's very important to think about. Because you can face a lot of liability if your e-commerce platform does something with personal information of users that isn't accounted for in your Terms of Service or privacy agreement. Those are the types of things you really want to think about, Matt.

Matt: Thank you, Enrico. One final question for you. Since I too am a small business owner, how does a small company, such as mine, hire an internet lawyer, such as you, to help with their e-commerce contracts? Also, what is the cost?

Enrico: That is the question every client wants to know. What can you do for me and what's it going to cost? At Traverse Legal, we have a very unique business model, in that we try in most instances to provide a guaranteed fee, a flat fee, for an e-commerce agreement package, which will control Terms of Service, privacy agreement, any e-commerce issues with vendors, etc. We would provide you a flat fee, with a list of defined deliverables. We guarantee that it will never cost more than X. Typically, you're going to spend a couple thousand dollars to get your initial e-commerce contract and forms in place on your website, and with your vendors. Depending on how complex your business model is, Matt, we'll be able to tell you how much it will cost, how long it will take, and what you're going to get within a few hours of contacting us. Simply hit the contact link on our website, send us an e-mail or call us up, and we'll give you information at no charge, we'll give you a price and tell you what you'll get. You can make a business decision, on if the price is worth the deliverable, the e-commerce contract package.

Matt: Well there you go. I hope that helps you on your e-commerce contracts. Enrico, I want to thank you for stopping by and helping us understand that better.

Enrico: My pleasure, Matt.

Matt: Thank you, very much. Join us next time on Internet Law Radio. I'm Matt Plessner.

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Comments

The online world is amazing. The fact that businesses and companies can generate as much or more revenue from Internet commerce rather than brick-and-mortar commerce seems almost commonplace now. 10 years ago, we were barely paying attention. Small businesses and startup companies tend to focus on building your Internet commerce platforms as their number 1 priority. Hopefully they will work within Internet law attorney who can help them stage out their terms of service, privacy agreement and other website agreements in a way that makes sense given the limited budget all startup companies face.

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